Innovassynth Investments Ltd Management Discussions

1. Macro-Economic Environment:

The global economy in FY 2024-25 witnessed continued volatility due to persistent inflationary pressures, tightening monetary policies in advanced economies, and geopolitical uncertainties. Despite these global headwinds, the Indian economy remained resilient and robust.

In India, growth is projected to remain solid at 6.5% in FY 2025-26. During 2024, agricultural growth touched a five-quarter high of 3.5%, supported by a strong monsoon, a healthy kharif harvest, and improved rabi sowing in the second quarter. The services sector also exhibited strength, with services exports growing by 12.8% year-on-year, reaching US$248 billion during April to November 2024.

On the industrial front, Indian manufacturing is moving steadily up the value chain. Electronics, engineering goods, and chemicals together now constitute 31% of Indias total exports, with significant contributions from micro, small, and medium enterprises (MSMEs), aided by rising credit availability and government support schemes.

From a monetary policy standpoint, the Reserve Bank of India (RBI), in its April 2025 policy review, reduced the Repo Rate by 25 basis points to 6% and shifted its stance to "accommodative." This move has bolstered confidence among businesses and investors, signaling continued support for economic and credit growth.

At a macro level, the Indian economy remains on a strong footing. The Finance Ministry, in its Economic Survey 2024-25, has reaffirmed the healthy state of Indias economy, underscoring resilience across agriculture, industry, and services.

2. Industry Structure and Developments:

The Company is in the investment business, and your company holds 36.73% in Innovassynth Technologies (India) Limited. The financial services and investment sector in India continues to witness regulatory changes, evolving compliance requirements, and increasing emphasis on transparency and corporate governance.

3. Opportunities and Threats:

The global CDMO market was valued at USD 224.6 billion in 2023 and is projected to grow at 6 7% annually over the next five to six years. In contrast, the Indian CDMO market is forecasted to expand at a much higher CAGR of 14.67%, increasing from USD 22.51 billion in 2024 to USD 44.63 billion by 2029. With Indian companies actively engaging in acquisitions, partnerships, and investment activities particularly in the biotech sector the industry outlook is highly favorable. The merger with ITIL is expected to position your Company to benefit directly from these growth opportunities. However, the Company is also exposed to certain risks and challenges:

Regulatory Risks: The merger is subject to approvals from the Honble NCLT and other statutory authorities; delays or conditions may impact timelines.

Concentration Risk: The Companys fortunes are closely tied to ITILs performance, given the lack of diversification.

Industry Risks: The CDMO sector is subject to global competition, regulatory compliance pressures, and pricing dynamics.

Macroeconomic Risks: Volatility in global markets, foreign exchange fluctuations, and supply chain disruptions could affect growth.

While opportunities in the CDMO sector remain strong, the successful completion of the merger with ITIL will be a key driver of the Companys ability to capitalize on these industry trends.

4. Outlook:

As discussed under the section "Opportunities and Threats", the Companys proposed Merger by Absorption of Innovassynth Technologies (India) Limited (ITIL) with the Company is a significant strategic step. The merger, once approved by the Honble NCLT and other statutory authorities, is expected to consolidate resources, streamline operations, and provide the Company with direct participation in the high-growth Indian CDMO industry, which is projected to expand at a CAGR of 14.67% from USD 22.51 billion in 2024 to USD 44.63 billion by 2029. The combined entity will be better positioned to leverage industry growth through: Enhanced scale and operational efficiencies. Strengthened presence in niche areas of nucleosides and amides. Improved financial strength and access to capital for expansion. Creation of long-term value for stakeholders. While the opportunities are promising, the Company acknowledges that the merger is subject to regulatory and judicial approvals, and the timeline is dependent on such clearances. Nevertheless, the Board believes that the merger with ITIL will significantly strengthen the Companys long-term growth trajectory and align shareholder interests with emerging industry dynamics.

5. Risk & Concerns:

The Company operates in a dynamic environment and is exposed to various risks inherent in its line of business. Key risks and concerns include:

The proposed merger with Innovassynth Technologies (India) Limited (ITIL) is subject to approvals from the Honble NCLT and other statutory authorities. Any delay or modification in the approval process may impact the anticipated benefits of the merger. The Company and its investee are also subject to stringent compliance requirements under SEBI, MCA, and other regulatory bodies.

The Companys investment portfolio is concentrated solely in ITIL, making its performance directly dependent on ITILs growth and profitability. Lack of diversification increases exposure to company-specific risks.

The CDMO sector, though high growth, faces challenges including pricing pressure, increasing competition (domestic and international), evolving technology, and regulatory oversight in global markets.

Volatility in global financial markets, exchange rate fluctuations, inflationary pressures, and supply chain disruptions could affect investment valuations and business growth. Shifts in monetary policy, including interest rate changes, may influence credit availability and investor sentiment.

Dependency on specialized R&D and skilled personnel within ITIL creates operational sensitivity. Any disruption in talent retention, R&D productivity, or compliance processes may impact performance. The Company continuously reviews these risks and seeks to mitigate them through prudent financial management, compliance monitoring, and close engagement with ITILs business and operational developments.

6. Internal Control Systems and Their Adequacy:

The Company has put in place adequate internal control systems commensurate with its size and nature of operations. The internal controls are designed to ensure:

Reliability of financial reporting,

Compliance with applicable laws and regulations, and

Safeguarding of assets of the Company.

Internal controls are monitored through the circulation of monthly compliance sheets, which are reviewed, discussed, and analysed by the management. Based on these reviews, appropriate forecasts are made, and a structured plan of action is drawn up and implemented. The Board has the view that the internal control framework of the Company is effective and provides a reasonable assurance on the efficiency of operations and adherence to statutory requirements.

7. Developments in Human Resources:

The Company continues to maintain cordial relations at all levels. Given the size and scale of operations, the human resource requirements remain minimal; however, the Company recognizes the importance of professional governance and skilled leadership in driving its long-term objectives.

8. Significant Changes in Key Financial Ratio:

During the financial year under review, there were no significant changes in the key financial ratios of the Company, except in the Current Ratio, which changed primarily due to an increase in borrowings as compared to the previous financial year.

9. Return on Net Worth:

During the year, there were no significant changes in the Return on Net Worth as compared to the immediately preceding financial year.

For and on Behalf of the Board of Directors of